What Abundance and open borders supporters get wrong
A measured critique from a supporter of these policies
Last Saturday, a major empirical result demonstrating agglomeration effects from density failed to withstand replication. Indeed this mirrors the earlier infamous revisions to Hsieh and Moretti (2019) showing an abnormally large cost of housing regulations to economic growth. A few days ago, Tyler Cowen made a meticulous observation of the general equilibrium effects of land-use policy on social mobility and networks in Cape Town. All of this induced me to ponder about the reliability of the empirical microeconomic evidence for positive spillover channels, and agglomeration, exerting a positive impact on innovation and growth.
Our priors from endogenous growth theory still appear to be supported by the causal literature. I would of course qualify with a distinction between density and proximity: more apartments in a taller block won't do much to impact innovation (if you've ever lived in one of these and a suburb, everyone knows you're far more likely to interact with neighbours in the latter than former!), yet being sufficiently close for regular face-to-face, and spontaneous interaction, appears to do so.
However, this raises an obvious tradeoff. Cape Town holds some of the most stunning natural scenery close to a major urban hub that one is likely to find. Natural beauty is nonrival, just as the positive spillovers of innovation are. Can this justify NIMBYism, and offset the welfare losses imposed via maintaining a semi public good?
To avoid plaigiarising ChatGPT's work, I implore you to read the entire chat, yet in most cases it's clear that NIMBYism exerts a negative cost to welfare. There's even a structural model to interpret the empirical literature and estimates (I would exercise the usual caution that one should with LLM generated work). However, in a few select cases, it's optimal to protect the natural environment in question from development [1].
How one calibrates policy, political incentives, and urban planning to incorporate this is a subject for another day: the overrarching thesis that Abundance cannot neglect that there are legitimate [2] cases when local communities might decide to block a development. My first-best solution would be for wealthy philanthropists to protect the undeveloped bucolic habitat via purchasing the land. As we don't have a free-market in land ownership, we must settle for a second-best mechanism design of permitting rules, which inevitably involves some deliberative and collective involvement of third-parties. If YIMBYs are to maximise their popularity, they should find an incentive-compatible solution to streamline when a development can be blocked to protect an overwhelmingly popular public space or not. Yes, small yet vocal activist and bureaucratic interests should not take advantage of the decentralised and litigious nature of planning applications, yet their voice shouldn't be discarded altogether.
Moreover, the existence of land-use restrictions also changes the calculus on open borders [3]. The most convincing argument in favour of some immigration restrictions stems from Garrett Jones: mean national IQ matters for economic prosperity via institutional quality, immigrants maintain most of their culture and traits [4], so open borders will result in a decline in institutional quality via importing a high number of third-world migrants; exerting a negative effect on governance. British councils adopting what are, in effect, blasphemy laws, are testament to this hypothesis. Rising rates of urban knife crime in Britain - unusual in a context of otherwise declining crime of all types, is primarily a feature of black inner-city gangs, and can be partly explained via a rise in the black population. Previously, I would have critqued this highly compelling critique of open borders with the unduly wise skepticism that any alternative amounts to governments engaging in social engineering regarding demographics and labour markets, which is obviously suboptimal given the track record of central planning in any other circumstance. Most immigrants and their descendents don't commit crime, so just increase policing resources and sentences in line with any shift in immigration trends, if this is your concern. As the Gulf states show, one can maintain the overall quantity and quality of your innovation with an elite right-tail. Additionally though, there is another flaw in Jones’ argument, grounded explicitly in land-use policy.
Here in Britain, it's common knowledge that minorities in major metropolitan centres perform much better on social mobility, as measured via all the usual means (for instance, going to university conditional on your parents not going, income and employment conditional on parental income, etc), than working-class whites in the North. Presumably, both groups start with a similar genetic endowment regarding IQ. In my view, this is convincing evidence that proximity to hubs of dynamism and progress facilitates mobility. This also substantially mitigates the concerns of immigration restriction advocates, as integration of the second and third generations is a lot more feasible than they think. Despite the noticeable nascent trend towards the hereditarian position on genetic inheritance of traits, environment still indeed plays a large role. Heritability of IQ is likely to be between 50%-60%, in line with most estimates for other traits: slightly below the twin studies estimates yet well above the molecular ones, which aligns neatly with my perspective on their respective biases. Hence, there is a large scope for both environment and policy (most notably housing policy) to assist or derail convergence. Becker's model of intergenerational inequality formalises this, showing that outcomes are path-dependent on both initial genetic endowment and early environmental investments. This is also why there's a strong correlation between holding Abundance-pilled views and being a supporter of open borders, as both policy positions complement each other.
Regardless of my measured critique, it's abundantly clear that Abundance attracts attacks disproportionately from the low human capital participants in public life, as do attacks on open borders. If this wasn't the case, then why would Elizabeth Warren, a highly intelligent academic, calculate that pandering to somewhat conspiratorial myths that PE is driving up housing costs, will assist her popularity? More generally, the opposition to Abundance seems to be concentrated amongst the hard-leftist base that elected Mamdami, and is driving the Greens to overtake British Labour. Elite human capital theory previously highlighted how educational polarisation makes the centre-left relatively smarter, or at least incentivised not to be too stupid to hold onto the votes of educated people.
So how do we explain the rising prominence of economic illiteracy as a core focus of centre-left policy agendas, when previously things like rent control were at least marginalised to the fringes? I would argue that educational attainment is distinct from IQ. Their voter base are primarily the dissappointed graduates failing to command a substantial premium, or being economically squeezed. Especially given the likely erosion in the signalling value of many degrees given the expansion in higher education, it's far from obvious that these graduates are even on the right end of the IQ distribution.
If resentful graduates are indeed the future of leftist and liberal politics, and they succeed in raising the salience and relative status of economic illiteracy, then I fail to see how they're any preferable to the equivalent stupid zero-sum populists on the right. Leftists make us poorer via shackling the planning system, rightists via imposing invisible shackles to free movement. The very fact that neither of these burgeoning coalitions raise the smart critques of Abundance or open borders suggests that one should still support them, even if such support is qualified rather than unequivocal.
Even this likely overstates the costs of expanding high-density metropolitan areas. Despite the favelas, Rio De Janeiro is similarly as picture postcard stunning as Cape Town, as any reasonable observer with good eyesight will conclude.
In this case, welfare-improving in the utilitarian sense.
I've not put this through ChatGPT yet so lack firm estimates of the welfare calculation, yet the gains from open borders should at least be revised downwards.
Yes this is evidence in favour of high heritability estimates, and mostly genetic explanations for observed socioeconomic and behavioural differences between the races. Note that Jones’ work leaves this assumption implicit, via using the IQ estimates derived from Lynn. Nonetheless, these track proxies correlate with IQ very well, so Lynn's work (the most comprehensive effort at gathering international data on a crucial variable for everything we care about in the social sciences) is unfairly maligned; mostly by those with a deeply ideological and egalitarian blank-slateist agenda. Likewise, Jones is also notorious for showing that cross-country GDP differences can be accounted for by differences in technology stemming from a millennium ago.